Capital Gains on Physical Gold: Holding Period, Tax Rates, and Indexation for AY 2026-27
TL;DR
- Physical gold (jewellery, coins, bars) held for more than 24 months is a long-term capital asset under the rules effective from 23 July 2024.
- Long-term capital gains (LTCG) on physical gold sold after 23 July 2024 are taxed at 12.5 percent without indexation.
- Short-term capital gains (STCG) on gold held for 24 months or less are added to your income and taxed at your slab rate.
- Cost of acquisition for inherited gold uses the previous owner's cost or fair market value as on 1 April 2001, whichever you elect.
- Sale of gold for more than Rs. 2 lakhs in cash triggers Section 269ST, and jewellers report PAN-linked purchases above Rs. 2 lakhs.
What this means in plain terms
Selling that old gold chain from your wedding is not just a sentimental decision. The Income Tax Act treats physical gold as a capital asset, and any profit on its sale falls under capital gains. Until July 2024, gold held for over three years qualified for indexed long-term gains taxed at 20 percent. The Finance (No. 2) Act 2024 cut that holding period to 24 months and replaced the 20 percent indexed rate with a flat 12.5 percent without indexation for sales on or after 23 July 2024.
For most households selling old jewellery to fund a wedding or property purchase, the change is broadly neutral. The lower headline rate offsets the loss of indexation for assets held a moderate length of time, while very long-held jewellery (think 1990s purchases) loses the indexation cushion entirely. Understanding which side of 23 July 2024 your sale falls on, and whether you qualify for a Section 54F exemption, can change your tax bill by lakhs.
How holding period decides the tax bucket
Short-term vs long-term threshold
Physical gold sold within 24 months of purchase is short-term. Sold after 24 months, it is long-term. The earlier 36-month threshold applied only to sales before 23 July 2024 under the pre-amendment regime.
Date of acquisition for inherited or gifted gold
When you inherit gold, your holding period includes the period for which the previous owner held it. So if your mother bought a gold chain in 2005 and gifted it to you in 2024, your sale in 2026 is still long-term because the combined holding period exceeds 24 months.
Pre-2001 holdings and grandfathered cost
For gold acquired before 1 April 2001, you can choose the higher of actual cost or fair market value as on 1 April 2001 as your cost of acquisition. The Income Tax Department accepts valuations from registered valuers for this purpose.
Calculating the gain correctly
Sale consideration
This is the gross amount received from the jeweller or buyer, before any making-charge deductions or melting losses. If the jeweller deducts melting loss, you can record the net realised amount as sale consideration, but keep the invoice as proof.
Cost of acquisition
Include the actual purchase price plus making charges, GST paid, and any incidental expenses like assaying fees. For old jewellery without invoices, a registered valuer's certificate is your best evidence. The CBDT permits substantiation through reasonable documentary evidence.
Cost of improvement
Resetting a stone, replating, or remaking jewellery counts as improvement if you have invoices. These are added to the cost base and reduce the gain.
Tax rates and exemptions
LTCG at 12.5 percent without indexation
For sales on or after 23 July 2024, LTCG is taxed at a flat 12.5 percent under Section 112. There is no basic exemption limit for LTCG beyond your overall basic exemption, meaning the gain is taxed from the first rupee once your total income crosses the slab threshold.
STCG at slab rate
If you sell within 24 months, the gain is added to your total income and taxed at your applicable slab. Under the new regime for FY 2025-26, slabs range from 0 percent (up to Rs. 4 lakhs) to 30 percent (above Rs. 24 lakhs) for individuals below 60.
Section 54F exemption
If you reinvest the net sale consideration of long-term physical gold in a residential house within the prescribed window (one year before or two years after for purchase, three years for construction), the LTCG is exempt proportionately. You must not own more than one other residential house on the sale date.
Reporting in the ITR
Which ITR form applies
If you have only salary and capital gains, file ITR-2. If you also run a business or profession, file ITR-3. ITR-1 (Sahaj) cannot be used when you have capital gains.
Schedule CG entries
Report long-term gains under Schedule CG Part B with sale date, cost, and indexation column left at applicable rate. For sales on or after 23 July 2024, the 12.5 percent column applies.
AIS and SFT reporting
Jewellers report cash purchases above Rs. 2 lakhs through SFT, and these appear in your Annual Information Statement. Match your declared sale value with AIS entries to avoid Section 143(1) intimation mismatches.
A real example
Meera, 42, Rs. 22L CTC, Pune, inherited a 200-gram gold necklace from her grandmother in 2015. Her grandmother had bought it in 1995 for Rs. 95,000. Meera sells the necklace in February 2026 to fund her daughter's college admission.
- Sale consideration in Feb 2026 at Rs. 7,200 per gram for 22-carat: Rs. 14,40,000.
- Cost of acquisition: Meera elects fair market value as on 1 April 2001. A registered valuer certifies FMV at Rs. 1,40,000 (gold was around Rs. 4,300 per 10 grams in 2001).
- Cost after grandfathering: Rs. 1,40,000.
- Long-term capital gain: Rs. 14,40,000 minus Rs. 1,40,000 = Rs. 13,00,000.
- Tax at 12.5 percent (sale after 23 July 2024): Rs. 1,62,500 plus 4 percent cess = Rs. 1,69,000.
If Meera had sold this before 23 July 2024, indexed cost using CII would have been around Rs. 5,06,000 (1.40L times 363/100), gain Rs. 9,34,000, tax at 20 percent Rs. 1,86,800 plus cess. The new flat rate saves her about Rs. 23,000 here despite no indexation.
What to do this week
- Pull out gold purchase invoices, jeweller bills, and any valuer certificates and store them in a single folder labelled with the asset name and acquisition year.
- If you bought gold before 1 April 2001, get a registered valuer's certificate establishing FMV as on that date.
- Reconcile any jeweller sale entries in your AIS for FY 2025-26 against your records before 31 May 2026.
- If you plan to reinvest in a house, time the sale and purchase to stay within the Section 54F window.
- Run the 6-step assessment at https://myfinancial.in to see your old-vs-new regime delta, unused deductions, and insurance gap in under 10 minutes.
FAQ
Is GST paid on gold purchase added to my cost?
Yes. The 3 percent GST and any cess paid at the time of purchase form part of the cost of acquisition and reduce your taxable gain on sale.
What if I have no invoice for gold bought 20 years ago?
A certificate from a government-registered valuer documenting fair market value as on 1 April 2001 is accepted as cost. Keep the valuation report on file.
Does the Rs. 1.25 lakh LTCG exemption under Section 112A apply to gold?
No. Section 112A's exemption applies only to listed equity, equity mutual funds, and units of business trust. Physical gold is taxed under Section 112 with no separate threshold.
Can I claim indexation if I sold gold before 23 July 2024?
Yes. Sales completed on or before 22 July 2024 follow the older 20 percent indexed regime under Section 48 with the cost inflation index notified for FY 2024-25.
Is digital gold (MMTC-PAMP, SafeGold) treated the same?
Yes. Digital gold purchased through fintech platforms is treated as physical gold for tax purposes since the underlying is allocated bullion stored on your behalf.
How is gold received as gift taxed?
Gold received from a relative defined under Section 56(2) is exempt at receipt. On subsequent sale, the donor's cost and holding period carry over for computing capital gains.
What about jewellery sold to a relative below market value?
If the sale price is below fair market value and the buyer is a relative, the seller still pays capital gains tax on the actual consideration. The buyer, however, may attract Section 56(2)(x) if the FMV exceeds consideration by Rs. 50,000.
Sources
- Income Tax Act 1961, Sections 2(42A), 48, 54F, 112 — https://incometax.gov.in
- Finance (No. 2) Act 2024 — https://incometax.gov.in
- CBDT notifications on Cost Inflation Index — https://incometax.gov.in
- Annual Information Statement and SFT reporting — https://incometax.gov.in
- RBI Master Direction on gold transactions — https://rbi.org.in
This is general information, not personalised advice. For your situation, consult a Certified Financial Planner.
